New Zealand CPI data missed them mark, instilling a blast of bearish volatility for NZD crosses as traders adjusted to the idea of a May cut.

 

At 1.5% YoY, it’s the lowest CPI read since Q3 2018 and below their own target of 1.6% (markets today were expecting 1.7%). Furthermore, QoQ was just 0.1% vs 0.3% expected.

 

RBNZ shifted to a dovish stancein March meeting, adding into their statement that “the next OCR direction is more likely to be down” and the “balance of risks to their outlook have shifted to the downside”. On the back of this we suggested their May’s meeting could be live and today’s CPI miss makes this the more likely.

The market reaction suggests traders are pricing in a rate cut in May to 1.5%, which would place their OCR at the same level of the RBA. Money flows into bonds, pushing the 2-year yield down to 1.48% with a 9bps drop, its worst session since 27th March (RBNZ’s last meeting).NZD/USD spiked -1.5% in a heartbeat and AUD/NZD spiked beyond our 1.0670 target (bullish wedge). It’s the weakest currency of the session by a long shot and clearly has accounted for all meaningful volatility. That said, after such a volatile move the pairs do run the risk of being over-extended over the near-term. But, structurally, we see potential down further NZD weakness once key levels are broken.

 

 

We can see on the daily chart that NZD/USD had been coiling within a triangle throughout Q1, before the elongated bearish candle on 27th March paved the way for a breakout. Whilst subsequent action drifted unconvincingly lower, today’s bearish range expansion puts momentum back into the hands of bears. Currently hovering around prior support, a close below 0.6700 today would be constructive of further downside. Ultimately, we remain bearish below 0.6783 and look for it to head towards the 0.6591 high.

 

 

 

Further out, we’re also keeping an eye on NZD/CAD for a break lower. Near the end of March we highlighted its technical juncture around its November 2016 trendline and, after a mild attempt to break it, prices have rolled over in line with the longer-term decline. A double top pattern appears to be forming and, if successful, project an approximate target around 0.8530. A clear break below 0.8900 confirms the double top, invalidates the 38.2% Fibonacci level and takes us back in line with the longer-term bearish trend.

 

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD: Snaps four-day winning run, but bull breakout still valid

EUR/USD fell 0.28 percent on Tuesday, engulfing Monday's high and low and ending the four-day winning streak. The currency pair however, defended the former resistance-turned-support of the 200-day MA.

EUR/USD News

GBP/USD retraces from 5-week high amid fewer fresh catalysts from UK

While renewed fears of no-deal Brexit and less dovish Fed speak dragged the GBP/USD pair back from a month’s high, the Cable trades little changed near 1.2690 during early Wednesday.

GBP/USD News

USD/JPY: Bulls back in charge, re-takes 107.50

The less dovish rhetoric from a selection of Fed speakers overnight continues to aid the post-FOMC US dollar recovery, prompting the USD/JPY pair to retest the midpoint of the 107 handle despite negative Asian equities. 

USD/JPY News

Conference Board Consumer Confidence: The China syndrome

The index declined to 121.5 in June from April’s revised 131.3. A much more modest drop to 131.2 had been predicted.  “The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence,” wrote Lynn Franco.

Read more

Gold bulls target $1485/oz

Gold prices rallied in Asia but stalled and started to deteriorate in European markets into consolidation before a sell-off emerged on the back of less dovish than expected rhetoric from Fed speakers on New York.

Gold News

Majors

Cryptocurrencies

Signatures